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Last Updated: Wednesday, 5 July 2006, 12:40 GMT 13:40 UK
Does switching still save cash?
By Ian Pollock
BBC personal finance reporter

Rising wholesale costs have driven up bills
With bills rocketing over the last year, the penny has dropped for hundreds of thousands of gas and electricity customers.

Take your custom elsewhere and you can save money.

British Gas recently admitted it had lost 350,000 customers since the start of the year.

Since the domestic market for gas and electricity supply was opened up in the late 1990s, more than half of the UK's households have changed supplier.

And with 26 million domestic electricity customers in the UK and 20 million gas customers, that means a lot of people have taken this step.

More savings

110 per year can be saved if you have never switched
Ofgem spokesman

But as more and more of us switch suppliers, are savings still possible?

The Government's energy industry regulator Ofgem says the answer is still yes.

"It is still very much worth switching - there are still savings to be made," said an Ofgem spokesman.

"Currently, 110 per year can be saved on average if you have never switched," he added.

That is an important point - the big savings that anyone can make usually come the first time you change.

The reason is simple. If you have never moved supplier, then you are probably still getting your energy from what was once a monopoly supplier - and being charged their highest tariff.

That supplier might be either British Gas - now owned by the utility company Centrica - or whichever company bought your former regional electricity board.

But since liberalisation, rival suppliers have been busy trying to poach each other's customers by offering cheaper tariffs around the country.

As an example, a high user with British Gas in London can save 129 a year by switching to the cheapest local supplier.

Across the whole country, the average saving that electricity users can make is 65 a year, if they switch from their current most expensive supplier to the lowest - and if they are paying quarterly by cash or cheque.

Still switching

The latest figures show 208,000 households are now switching gas or electricity every week.

Electricity bill
Experts say even people who have already switched could save money

With average domestic bills now rising to about 900 a year, it is not hard to see why.

But can you still make savings if you switch a second or even a third time? The answer seems to be maybe.

And it might depend on when you last changed supplier, according to Tim Wolfenden of Uswitch, a utility comparison website.

"Someone may have changed supplier four years ago, say, to an electricity company offering gas as well, with a dual-fuel discount. But offers from rival companies have changed since then and another switch may be worth it," Mr Wolfenden said.

"But we would urge people to check their tariffs every year now, just as people check their car insurance to see if they can get it cheaper elsewhere."

Money can also be saved simply by changing the way you pay for your bill.

Moving from paying by quarterly cheque or cash to direct debit should save about 30 to 35 a year. Agreeing to manage your account online may save you a bit more.

Diminishing returns?

As customers continue to churn, it is unlikely that one company will always be cheaper or more expensive.

As they keep telling us, all suppliers buy their wholesale gas and electricity at roughly the same prices in the same wholesale market.

The government rarely hands out advice about the prices consumers can expect to pay from privately-owned companies.

But utilities have been an exception.

Since liberalisation, the regulator Ofgem has consistently promoted the benefits of shopping around.

And now there are at least 10 web sites offering immediate price comparisons and advice on what steps to take.

Ofgem is keen to stress that it is quite easy to do.

"Some people may be put off, thinking it is a long complicated process," a spokesman said.

"But it takes about a month and once you've signed the forms, the companies do it all for you - so it is a relatively simple thing to do."

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